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Earnings Preview: Gold Miners’ 2Q17 Expectations

Thursday, 13 July 2017

Gold versus gold mining companies

Gold prices (GLD) rose 8.0% in the first half of 2017, following their 8.5% rise in 2016. The VanEck Vectors Gold Miners ETF (GDX), which seeks to replicate the performance of the NYSE Arca Gold Miners Index, rose 5.5% in the same timeframe

The gains in gold miners, on the other hand, have been diverse. The miners seem to be driven more by company-specific factors rather than following the lead of gold prices in 1H17.

Company-specific factors

Among the senior miners, only Kinross Gold (KGC) has shown double-digit growth, rising 31.0% in 1H17. The other three major senior miners—Barrick Gold (ABX), Goldcorp (GG), and Newmont Mining (NEM)—have seen losses of 0.4%, 5.1%, and 4.9%, respectively. Agnico Eagle Mines (AEM) is the only other senior miner to see gains, with 7.4% growth.

Among the intermediate miners (GDXJ), IamGold (IAG) has shown impressive growth of 34% in the first half of 2017.

Barrick Gold has been affected by issues at its Veladero mine. Newmont Mining’s plan to increase unit costs over the next two years has disappointed investors, while Yamana Gold’s (AUY) higher-than-expected costs and capital expenditures worked against the stock.

Series overview

While the above-mentioned companies have diverged significantly regarding their first-half performance, one of the important ways to gauge their second-half performance is through their upcoming earnings. Newmont Mining plans to kickstart the 2Q17 results season for gold miners on July 25, 2017, before the market opens. These companies expect to provide updates on their production growth, projects, and cost guidances.

In this series, we’ll assess their upcoming results by looking at the analysts’ expectations regarding their revenues, earnings, and free cash flows. We’ll wrap up the series by looking at their relative valuations and the catalysts that could drive their valuations going forward.